Correlation Between DeviceENGCOLtd and Korea Computer

Can any of the company-specific risk be diversified away by investing in both DeviceENGCOLtd and Korea Computer at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DeviceENGCOLtd and Korea Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DeviceENGCOLtd and Korea Computer Systems, you can compare the effects of market volatilities on DeviceENGCOLtd and Korea Computer and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DeviceENGCOLtd with a short position of Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeviceENGCOLtd and Korea Computer.

Diversification Opportunities for DeviceENGCOLtd and Korea Computer

0.13

Correlation Coefficient

DeviceENGCOLtd  Korea Computer

Average diversification

The 3 months correlation between DeviceENGCOLtd and Korea is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding DeviceENGCOLtd and Korea Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer Systems and DeviceENGCOLtd is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DeviceENGCOLtd are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer Systems has no effect on the direction of DeviceENGCOLtd i.e., DeviceENGCOLtd and Korea Computer go up and down completely randomly.

Pair Corralation between DeviceENGCOLtd and Korea Computer

Assuming the 90 days trading horizon DeviceENGCOLtd is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, DeviceENGCOLtd is 3.41 times less risky than Korea Computer. The stock trades about -0.03 of its potential returns per unit of risk. The Korea Computer Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  746,878  in Korea Computer Systems on December 4, 2024 and sell it today you would earn a total of  337,122  from holding Korea Computer Systems or generate 45.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DeviceENGCOLtd  vs.  Korea Computer Systems

DeviceENGCOLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days DeviceENGCOLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DeviceENGCOLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Computer Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Computer Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Computer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DeviceENGCOLtd and Korea Computer

The main advantage of trading using opposite DeviceENGCOLtd and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DeviceENGCOLtd position performs unexpectedly, Korea Computer can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Korea Computer will offset losses from the drop in Korea Computer's long position.

The idea behind DeviceENGCOLtd and Korea Computer Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.